Ford's bow to Trump benefits robots, not workers

Jeff Kowalsky, EPA

A Ford Focus on the assembly line at Ford Motor Company's Wayne Assembly in Flat Rock, Wayne, Mich., in January 2015. Ford canceled the $1.6 billion investment in the Mexican town of San Luis de Potosi, where it planned to build a new vehicle assembly plant.

A Ford Focus on the assembly line at Ford Motor Company's Wayne Assembly in Flat Rock, Wayne, Mich., in January 2015. Ford canceled the $1.6 billion investment in the Mexican town of San Luis de Potosi, where it planned to build a new vehicle assembly plant.

(Jeff Kowalsky, EPA)

Mark GilbertBloomberg View

Ford's decision this week to scrap a $1.6 billion investment in Mexico, following criticism from Donald Trump, shows government intervention can be "good for industry and it's good for employment," according to French presidential candidate Marine Le Pen. As far as the workers in this particular case are concerned, the numbers suggest otherwise.

The U.S. automaker says abandoning its Mexico plan and instead spending $700 million to expand its domestic operations in Michigan will create just 700 jobs. Even I can work out that's $1 million per new employee hired.

Amid the ongoing debate about whether robots are poised to steal everyone's jobs, that feels like a chillingly low number of new hires for an investment of that scale. And while automation may be particularly suited to replacing human hands for bashing, bending, welding and painting metal to make cars, the acceleration in the production of industrial robots in recent years suggests it's not just workers in car factories who should fear the rise of the robots.

The International Federation of Robotics says the auto industry is "the most important customer" for industrial robots, buying almost 40 percent of total global output of the machines. In the first half of this decade, sales to carmakers have increased at an average pace of 20 percent per year, IFR says.

Ford says Trump's criticism of the auto industry moving jobs abroad wasn't the motivation for its change of plans, citing instead a drop in demand for the small cars it planned to build in Mexico. That may or may not be true; the company could hardly admit to changing course because of the tweets of the President-elect.

But it does seems likely that those industry trends, including a wider acceptance of electric cars and the carmakers' drive to develop self-driving vehicles, mean Ford needs to expand where its smartest engineers, best-technology and advanced automation are located, rather than seeking low-cost production lines.

It's a century since Henry Ford introduced the moving assembly line that slashed the time taken to build a single vehicle to 90 minutes from 12 hours. The Model T, however, had just 3,000 parts; Toyota reckons it currently takes about 18 hours to build a car featuring about 30,000 individual parts.

Employing a human welder in a factory in the U.S. costs about $25 per hour including benefits, according to a 2015 study by the Boston Consulting Group; that drops to just $8 per hour for a robot, including installation, operating costs and maintenance. By 2030, "the operating cost per hour for a robot doing similar welding tasks could plunge to as little as $2 when improvements in performance are factored in," BCG said.

The rise of automation has had tangible financial benefits for the auto industry. Ford's annual revenue per employee, for example, has climbed 27 percent in a decade, although it's slipped a bit from its 2011 peak.

Donald Trump blames Mexico and China for stealing millions of jobs from the United States.

But it's not just factory workers who should be nervous about robots, software and automation. More than half a century after the world's first industrial robot, the Unimate #001, made its debut in a General Motors factory, Martin Ford's "The Rise of the Robots" won the Financial Times/McKinsey business 2015 book of the year award.

Ford, a software engineer with more than a quarter of a century of experience in computer design, argued that technology threatens to revolutionize all kinds of workplaces, with machines becoming replacements for workers rather than tools for their use:

"While lower-skill occupations will no doubt continue to be affected, a great many college-educated, white-collar workers are going to discover that their jobs, too, are squarely in the sights as software automation and predictive algorithms advance rapidly in capability. Employment for many skilled professionals — including lawyers, journalists, scientists and pharmacists — is already being significantly eroded by advancing information technology. They are not alone: most jobs are, on some level, fundamentally routine and predictable."

My household acquired an Amazon Echo at Christmas, a voice-powered speaker hosting Alexa, a digital assistant. She's far from perfect; she'll happily babble away trying to answer questions she thinks my television has asked her, and clueless about what date tradition suggests I should take down my Christmas decorations.

But for adding or inspecting a personal calendar, booking rides on Uber or adding reminders to a schedule, Alexa can replicate many of the functions of an old-fashioned secretary — suggesting algorithm-driven digital assistants are becoming smart enough to become the corporate PAs of the future.

In much the same way as iPads and other touchscreen tablets that were designed for consumers have invaded the workplace (the coffee machine in Bloomberg's London pantry is iPad-controlled), digital assistants have the potential to migrate to the office from the living room to take over admin tasks.

Ford's investment plans highlight how the auto industry is at the vanguard of this brave new robotic world. But make no mistake: The rest of us should be looking over our shoulders.

Bloomberg View

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."